Thursday, December 4, 2008

House Prices Fell 16% Y-o-Y, Car Sales Down 36.8% November

The pound is at a record low against the euro this morning (1.15). Today we’ll probably see the Bank of England cut base rates to 2%. Alistair Darling says we’ll be out of recession by the second half of next year – which seems to Guido very, very unlikely. The government says it will be underwriting the entire mortgage business, not just through quasi-nationalisation of banks, but by guaranteeing defaulting borrowers for 2 years. This is not a recipe for sound money. At this rate we will soon have to rename the currency the Great British Krona…

Tuesday, December 2, 2008

The Run on the Pound

Yesterday sterling had the biggest drop it has had since it was forced out of the ERM on White Wednesday in 1992. The pound was down 4% at $1.48 and it fell 2.9% against the euro and tumbled 4.8% versus the yen. It just goes to show how bad Britain’s situation is that this isn’t even front page news on every paper.

UPDATE : This just in from a co-conspirator:

Hello Guido,
I’ve been perusing the great work of fiction that is Gordy’s oops, the Chancellor’s growth forecasts, and on page 1 of Annex A: The Economy we have this bullet-pointed gem:

‘UK GDP growth of 3/4 % for 2008 with the economy contracting in the second half of the year’

Now, when the chancellor stood up at the dispatch box, three quarters of 2008 GDP growth were known:

Q1 0.3%
Q2 0%
Q3 -0.5%

In order to hit the forecast 0.75%, the economy has to grow at feisty 1% in the fourth quarter. Has the Chancellor been outside recently?

Is it any wonder that foreign investors have lost confidence in Britain, Gordon has missed his GDP growth forecasts every year since 2006. The Chancellor makes fantasy forecasts that no one believes, least of all HM Treasury, does he really expect GDP to surge this quarter?

UPDATE II : Some querying via email of how the GDP quarterly statistics are precisely computed by someone who seems to know what they are talking about; “There are lies, damned lies and statistics”.

Monday, December 1, 2008

+++ Pound Crashes Below $1.50 +++

And dropping… think this constitutes, as predicted by Osborne, a run on the pound.

Bad News, Good News

With a load of economic data out this morning the pound is off 1% against the euro, the Purchasing Managers Index is down sharply, mortgage lending is down 70% year on year, credit card borrowing is up, PWC have research out saying Briton’s are now personally £1.5 trillion in debt – yet Gordon wants them to spend, spend, spend more.

It is not all bad news though, Guido is short the FTSE….

Friday, November 28, 2008

+++ Taxpayer Loses £2 Billion in RBS First Day of Ownership +++

Taxpayer paid 65.5p, currently trading 55p. Loss of £2 billion on the first day the taxpayer became the majority shareholder. It is only money…

Wednesday, November 26, 2008

+++ MFI & Woolies Bust +++

Bankruptcy was not entirely unexpected in the case of these two ailing retailers. Despite Mandelson pleading with Woolies’ bankers into the early hours of this morning they pulled the plug regardless. Tuppence off prices won’t make much difference for them.

Keen readers will notice the change to the portfolio on the right hand side for the first time in a month. Guido has just shorted FTSE futures and Dow futures. Combination of bad local news and a sense that there is a mood of bailout fatigue in the U.S. There is usually a “Santa Claus rally” in the markets at year end. Not sure Santa is going to come this year…

Tuesday, November 25, 2008

People Will Bail Out of Bail Out States

Jack Thurston, a former special adviser to Gordon’s enforcer Nick Brown, and one of early New Labour’s more cerebral types, writes in this morning’s Wall Street Journal of the perils ofA Permanent Bailout. Even a perennial optimist like Guido wonders if we are finally seeing the the delayed end of the twentieth century era of Anglo-American global dominance as predicted by the CIA. The economies of the U.K. and the U.S.A. are being burdened with government debts of epic proportions, our children (and their children as well) will be indentured tax slaves.

Hyperbole? The government bond markets will enslave the citizens and subjects who pay the taxes that service their demands as surely as feudal barons demanded their lands were ploughed for their table by serfs. It is stunning that Brown’s policies have cost HM Treasury, in real terms, more than it took to defeat the Luftwaffe and the Wehrmacht. The debt obligations of the state will be £2 trillion within a few years, Gordon ignores the unfunded pensions of his bloated public sector bureaucracy and admits to “only” £1 trillion. The long term consequences of a debt burden as great as this are that Britain will have a permanently low growth economy. If, as is most likely, predominantly foreign investors hold government bonds, higher taxes will reduce the available capital which can be put to productive use in the domestic economy because the interest paid is exported. That is if they are not too worried about Britain going bust to invest at all. The chart above (click to enlarge) shows the cost of insuring in the credit default swap market against the U.K. government going bust is nearly triple the German rate. British Gilts are becoming the junk bonds of the G7.

Do people want to live in a country designed by Gordon Brown, as cheered on this morning by Polly Toynbee, Will Hutton and Roy Hattersley? Is there a prospect on the horizon of a radical government which can arrest the inevitable decline? Is there a Thatcher-like political leader who can turn around the super-taxer-tanker of state? Guido suspects a lot of internationally mobile people will be weighing up the prospects and possibly heading for the exits soon.

UPDATE : From The Times this morning; “In recent years, thousands of educated Australians have come to the UK. Immigration has been the start of a career, not a gap year, it adds. So there should be some alarm at the fact that they are heading back home in ever larger numbers: 2,700 a month compared to 1,750 a month in 2005. This is largely a vote of no confidence in the old country.”

Australia runs a budget surplus, has paid down the national debt in the good years and welcomes skilled migrants. Form an orderly queue.

Thursday, October 16, 2008

City Starts to See Capital Flight, Lehmans Regulatory Mess Forces More Selling, Italy Could Bring Down the Euro

The return of socialism to British shores and the expropriation under terror laws of Icelandic assets has unnerved some foreign investors. The problem with the government doing things out of expediency in pursuit of headlines is that the actions are remembered long after the headlines have faded. “If it can happen to Iceland it can happen to us” some of the huge sovereign wealth funds will be thinking. Trust is key to successful markets, would you risk trusting this government?

Elsewhere fund managers are seeking a quick resolution of Lehmans bankruptcy issues, billions remain frozen in accounts resulting in margin calls on fund managers unable to retrieve securities from the Lehmans administrator – making them forced sellers and an extra downward pressure on London’s markets. The FSA or the Bank of England needs to untangle this mess urgently. Unfortunately it is unclear who has responsibility under Gordon’s regulatory regime.

City law firms are dusting off old legal tomes from the seventies on sovereign defaults – when countries go into bankruptcy – Iceland is on the edge. What will surprise many is that Italy is the second candidate for bankruptcy. How will the Euro survive a member country’s financial collapse? Italy has cooked the books since before even joining the euro. Bond markets know it, the wide spread between Italian government bonds and German government bonds shows that many believe that European unity will not include the Bundesbank standing behind Italian Buoni del. Tesoro Pluriennali. If Italy fails what happens to the European project?

Markets Give Gordon Thumbs Down

So how many shares opened up this morning? None.

Hat-tip : Alphaville

Monday, October 13, 2008

Lehman Derivatives Defusing Safely

The unwinding of Lehman’s credit default swaps appears to be going well. Market nervousness about systemic risk was said to be at the heart of banks hoarding cash, no financial detonations have been reported. Market authorities reckon the net losses could be as low as $6 billion. Hardly anything…


Seen Elsewhere

Polling Averages Trend | PoliticalBetting.com
Speaker Faces Questions Over Pass for Donor | Sun
Tory MPs’ Visit to Israel Condemned | Guardian
Labour Was Too Slow for the Squeezed Middle | FT
Papers Pan Cam’s Immigration Pledge | ConHome
Deane of St Edmundsbury? | Times
Pay Volunteers and They Become Cheap Labour | Jill Kirby
UKIP Fundraiser Was Jailed for Running Brothels | Times
Bercow Faces Probe Over Pass Mystery | Mirror
Harman Breaks Rules on Paying Staff | Express
Labour Whinge About Sandi Toksvig Joke | Mail


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John McTernan told Channel 4 News

“You can’t make an omelette without breaking a few eggs, you don’t win in politics without breaking legs.”



Rob Wilson says:

Without Predujice

Darling

What time will dinner be ready this evening?

Yours

Rob Wilson MP

In the interests of me I am placing a copy of this email in the public domain.


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